MAKE WESTMINSTER WORK FOR WALES

Plaid Cymru is right to clearly state that it would use a hung parliament to push for measures to strengthen the Welsh economy in order to secure a recovery that benefits all the people of Wales. Plaid wants to see a steadier, more responsible rational approach to tackling the deficit that would include a modest increase in government departmental spending and a boost for infrastructure investment.  

Plaid has outlined plans to tackle the UK deficit in a steadier, more responsible manner than the current Westminster government's approach. Plaid refuses to balance the books on the back of the poor. Instead, Plaid want to see a modest increase of 0.5% per year in government departmental spending, starting in 2016-2017. This would lead to a decline in the budget deficit from 4.2% in 2015-2016 to 1.4% in 2019-2020 - a reduction of over 60% that wouldn't come from savage cuts to our vital public services.

An additional 1% of GDP invested across the UK in infrastructure in order to boost the economy and create jobs would grant Wales an extra £950 million each year to spend on our roads, railways and more. In the event of a hung parliament, Plaid Cymru will rightly demand the same deal for Wales as Scotland, in terms of resources and responsibilities. This is vital so we can invest in jobs and generate growth. Quite simply this would mean an additional £1.2 billion a year for our nation - £400 per head for every person in Wales - and is a simple matter of equality. 

Plaid Cymru would also press Westminster to introduce a living wage by 2020. This would not only secure a pay rise for 250,000 Welsh workers, it could also bring about £2.1 billion additional income through tax and save around £1.1 billion in in-work benefits. These proposals would help to bring down the deficit without inflicting more pain on our communities and also shatters the Westminster consensus that there is no alternative to cuts.

BACKING OUR SMALL BUSINESSES

Small businesses in Wales make a vitally important contribution to our economy and account for 99% of all businesses in Wales; it is vital we support this sector. Business rates account for a significant part of operating costs for small businesses and as a result prevent businesses from growing, from investing in themselves and in many cases, creating more jobs. We need to remove the burden of business rates and allow our private sector to flourish and create employment opportunities. The figures highlight the number of small businesses which are struggling to meet their bills and who, under Plaid Cymru plans, would not have to pay any non-domestic rates.

A Freedom of Information request by the party revealed that more than 3,000 businesses with a rateable value of under £10,000 had liability orders issued against them for non-payment over the past three years, they would be among 70,000 businesses taken out of the rates system. Over 3,000 small businesses in Wales fell into debt over their business rates would be taken out of paying non-domestic rates altogether under plans drawn up by Plaid Cymru. The Party of Wales’s has pledged to scrap business rates for all enterprises with a rateable value of under £10,000 relief with those between £10,000 and £15,000 also seeing their bills reduced.

Plaid has long championed the importance of local economies when it comes to generating national wealth. Every £1 spent in a local business selling local produce is worth twice as much to the economy as £1 spent in a supermarket, due to local reinvestment and spending. As noted by the Campaign for the Preservation of Rural England, every £10 pound spent in a local business circulates at least three times before it leaves the local economy rather than vanishing when spent in the branches of chains.

It is vital to ensure more people have the opportunity to economically support their local town centres across Wales, so we making them the vibrant heart of the community they once were. Over the last 30 years in Monmouth constituency (and elsewhere) we have all seen the damaging economic and social effects of bad shortsighted questionable planning decisions on our small towns. The Welsh Government needs to actively support our town centres and create a more level playing field for small to medium sized local businesses. Our town centres should be the economic heart of our communities, generating local wealth and jobs for our people.

Business Rates in the Gwent area

BLAENAU GWENT

2013 and 2014:Non-domestic rates liability orders (as of January 30 2015): 232

Arrears @ March 31, 2014: £1,233,000

Liability Orders on businesses with rateable value of less than £10,000:  168 (running total as of September 2014):

CAERPHILLY

2013-14:Non-domestic rates liability orders: 229

Arrears @ March 31, 2014: £1,078,399 (year only)

Liability Orders on businesses with rateable value of less than £10,000: 290 over three years

MERTHYR TYDFIL

2013-14:Non-domestic rates liability orders: 76

Arrears @ March 31, 2014: £797,946

Liability Orders on businesses with rateable value of less than £10,000: 53 over three years

MONMOUTHSHIRE

2013-14:Non-domestic rates liability orders: 209

Arrears @ March 31, 2014: £1.6m (gross)

Liability Orders on businesses with rateable value of less than £10,000: 307 over three years

NEWPORT

2013-14:Non-domestic rates liability orders: 310

Arrears @ March 31, 2014: £1.92m

Liability Orders on businesses with rateable value of less than £10,000: 104 over 3 years

TORFAEN

2013-14: Non-domestic rates liability orders: 39

Arrears @ March 31, 2014:  £1,287,084Liability Orders on businesses with rateable value of less than £10,000: 39 over three years

MAKING THE CASE FOR LIVING WAGE

For too long economic development in Wales focused on maximising our potential as a ‘low wage economy’ this short sighted strategy was never going to work in a globalised world where manufacturing and assembly work could be easily completed in the developing world. The two weeks from Monday 24^th March onwards are ‘Fair Pay Fortnight’ and Plaid has rightly repeated the call for the implementation of a living wage to lift thousands people out of poverty. The economic weakness of our economy has been highlighted by TUC research which shows the expanding pay gap between Wales and London. New research from the TUC shows that between 2000 and 2013, the pay gap between the top 10% of earners in London and the bottom 10% in Wales rose by 9.8%. Our economy has periodically struggled because of a combination of poor decision, poverty of ambition and ill-thought out public procurement policies none of which has helped when it comes to sustainable economic development. Plaid Cymru’s priority rightly focuses on rebooting and redeveloping the Welsh economy, part of this can be achieved by transforming Wales from a low-wage economy to a higher wage economy by developing high-skilled, well-paid jobs. 

WORKING FOR WALES

If we are serious about developing small to medium sized enterprises (SMES) then there is a need for a new business bank (for Wales) to help small and medium sized businesses grow to reach their potential. At the moment (and sadly probably for the foreseeable future) many of our small and medium sized enterprises are  being denied credit by banks and this is smothering potential economic growth and the expansion of our private sector. A Bank of Wales, could potentially run in the same way that the Sparkasse and Landesbanken (in Germany) which operate on a strictly regional basis and aim to support local industries and businesses.

This is not a particularly new or radical idea, it may well be one who’s moment has arrived. We should remember that historically we once had a network of local banks focused on the drovers who moved livestock to sell in the larger export market. Local banks were killed off in the last quarter of the nineteenth and most of the twentieth century’s as financial services were increasingly amalgamated, centralised and standardised (in London). This did little for local entrepreneurs, business people and has done little for ordinary bank customers as banks have been increasingly run to serve their own needs rather than those of the people. 

As has been previously noted elsewhere (by oggybloggyogwr); Germany has a unique network of state-owned, federal state-based (Länder) banks called Landesbanken. They offer a mix of commercial and private banking services and employ tens of thousands of people across Germany. They're primarily a source of credit and bonds for both public sector and private companies within their respective states. So the "big bank money" tends to be cycled within the state. That's probably one reason why economic disparities between regions aren't as pronounced within parts of the former West Germany as they are in a unitary state like the UK or France. 

During it’s relatively short life, what was known in some circles as the Plaid driven One Wales Government made real efforts to act differently when it came to economic development and to provide support for SMEs. They can and should play a significant role at the heart of our communities; they create wealth and sustainable medium to long term employment opportunities for local people often with more flexible working conditions.

Since May 2011 the Labour in Wales government has simply dusted off the old and unsuccessful Welsh office model of economic development. Simply attracting branch factory operations of a relative short term duration does not help develop or sustain our economy. More than ever we really do need to think differently and focus economic development priorities on smaller local businesses who will be rooted in our communities and offer more flexible employment opportunities.

As has been noted elsewhere profits and investments made by home grown locally rooted businesses tend to stay within the communities where they are based for longer. So the concept of new Bank of Wales business bank to help small and medium sized businesses is one realistic way of enabling SME’s to grow and create wealth in our communities, not to mention developing and sustaining longer term employment possibilities.

A WIN WIN FOR WALES

There is much to commend Plaid Cymru’s Plan C which concisely and clearly identifies the linked nature of economic renewal and economic recovery necessary to get our country back on its feet economically.  Simply relying on the failed models of economic development and redevelopment to get our country out of the economic hole that we are in just won’t work. We need to change Wales and break the link with the economic consequences of the financial crisis which was largely caused by the banking sector.

What Plan C offers is realistic achievable alternative to the years of economic stagnation and austerity which are all that’s being offered by the Westminster based political parties. One way that the Welsh government can make a real and lasting economic difference is by maximising the economic opportunities offered to  Welsh businesses via its procurement policy.

A ‘buy local’ campaign is a real economic must, this will necessitate legislation to improve public procurement, something that can provide real opportunities for Welsh based business within the procurement chain – potentially this could create some 50,000 new jobs. Significantly improved local procurement policy can create and secure jobs, boost employment levels and help small to medium sized enterprises in many of our communities.

At a very basic level it comes down to maximising the local economic opportunities from the £ 4.3 billion pound public sector spend in Wales – which is used to procure and purchase goods and services.  There have been some real improvements when it comes to public procurement over the last ten years, but, there is still room for substantial improvements to be made.  The increase in Welsh procurement of goods and services from 34% in 2003 to 52%  (June 2012) something that follows extensive efforts by Plaid Cymru as part of the One Wales government (between 2007 and 2011).

If we are going to spend public money then we need to work it hard and maximise the economic impact every penny and every pound and to make sure that it works to help the Welsh economy. At present for every £2 spent procuring goods and services, £1 of that immediately ‘leaks’ out of Wales.  Value Wales has suggested that for each 1% increase in goods or services procured from Wales, around 2,000 jobs are created.

So if we can achieve a local public spend of something close to 75% then potentially some 46,000 additional jobs can be created. The impact of a well thought out and implemented public procurement policy is something that could economically give and give again. This is the crux of the matter, it could be a real win win situation for Wales, potentially cutting unemployment by around a third or about the same number as the increase in unemployment that we have suffered since the recession began.

Before people kick off and say that the setting targets is ruled out by European Union regulations, there is a enough freedom of action to significantly increase procurement from firms (based in our country) to 75% within the existing rules. There are more than enough examples of this from elsewhere in Europe where in Germany and France some 98% of the value of public contracts are won by companies within their borders.

The 2012 McClelland review shows what can be accomplished with good examples of best practice.  The review recommended legislation to ensure that public bodies involved in the public procurement process are required to appoint specialist procurement officers, and that Welsh Government guidelines are followed.

We have some excellent examples of public procurement including the Arbed scheme to improving housing energy efficiency where 41 of the 51 companies involved in the scheme (80%) were based in Wales. Other good examples are the Church Village and Porthmadog bypass contracts which were agreed when Ieuan Wyn Jones was Economy and Transport Minister where local training clauses were used to good effect.

Local procurement and business opportunities can be boosted encouraging contracts that are ‘small’ and ‘unbundled’ as well as maximising opportunities for consortia of small local firms to bid for larger contracts. Better thought out public procurement contracts can include public benefit clauses which can boost the chances of local firms winning bids and contracts rather than ending up automatically rejected or excluded from participating in the procurement process.

There is no reason why commitments to local training, carbon footprint reduction and the use of the Welsh language cannot be built into public procurement contracts where they are appropriate. There could be a knock on effect from all of this aside from local economic gains as the investment in skills and companies will provide spin-offs across the country delivering improved employment rates. More jobs and more secure jobs will boost wages as business success grows there will be more opportunities for better training and improved business practices.

A DIFFERENT APPROACH

You may get the impression from time to time that that our country is littered with the remnants of failed models of economic development, most of them having failed to deliver long term economic benefits and more than a few long term jobs to our people and our communities. Perhaps what needed is to step away from the centralised state dependent model of economic development, as successive Westminster governments (regardless of party) have pretty much consistently failed to deliver for Wales. 

 While we do need some fresh economic thinking, we need to think differently and to find other economic models that can deliver sustainable long term jobs and lasting material benefits to our communities and to our country. Our over-dependence on Westminster or Cardiff Bay for that matter to solve our economic problems is understandable considering the nature of our economic and political history, but, is in my opinion regrettable. 

The days of bringing in significant amounts of ‘inward investment’ are probably realistically over, Westminster has better things to spend its money on, at least as far as it is concerned. What we need are indigenous home grown businesses which will put down roots and stick around when economic times are tough rather than pulling up sticks and bugging out when the grant money runs out. We need to develop small to medium sized enterprises or local co-operative industries which will provide medium to long term sustainable job opportunities.

Mondragon

The co-operative model has worked well in Ireland and in the Basque country, there is no reason why it cannot work well here in Wales. The Basque cooperative model, as personified by Mondragon co-operative shows what can be accomplished. To grow local businesses and local jobs we are going to have create a real Bank of Wales, perhaps using the German Sparkasse and Landesbanken model which operate on a strictly regional basis and focuses support to local industries. 

At present too many small and medium sized businesses in our country are being denied credit by banks and this has prevented the growth of our private sector. The German Sparkasse and Landesbanken operate on a geographical basis, and have developed special expertise in the local industries so that they are better equipped to make investment decisions. The over centralised dividend driven rootless banking model that has been followed in the UK is incapable or unwilling to deliver or support economic development in Wales. 

Adam Price, rightly recently pointed out that“there are some great contemporary examples of Welsh co-operation at work.  Time-banking was a great idea developed by American Edgar Cahn, but it’s in the south Wales Valleys that it’s taken deepest root.  Antur Aelhaiarn, the UK’s first community co-operative, is still going strong after thirty years.  Glas Cymru is such a unique example of utility-based mutualism that Harvard has made it a case study.   But these wonderful examples are so often beacons without bridges, lone successes that have never scaled into a full-flung Mondragon-like movement”.

Jobs with Mondragon

Mondragon which is a collective of around 250 companies and organisations based in the Basque Country is proving to be one of the moreresilient economic success stories in recession-hit Spain. The Basque co-operative may well be the world's largest worker co-operative, it is certainly helping the Basque economy to try and resist the worst ravages of the recession in Spain. The company was established in 1956, in the province of Gipuzkoa; employs around 83,800 people with a business philosophy built around co-operation, participation, social responsibility and innovation. 

It began small, with a group of workers in a disused factory, literally using hand tools and sheet metal to make oil-fired heating and cooking stoves. It is now a large conglomerate with over 260 manufacturing, retail, financial, agricultural, civil engineering and support co-operatives and associated businesses; and has annual sales in excess of $US 20 billion (2012 figures). The Cooperative competes on international markets using democratic methods within its business organisation, helps to create jobs, and is committed to the human and professional development of its workers and pledges to development with its social environment. 

The unemployment rate in the Basque Country is 15%, and lower in the province of Gipuzkoa, (where much of Mondragon is based), the unemployment rate in Spain as a whole is now 25%. Some parts of the co-operative are wholly owned, others are run as joint venture operations, with some 114 local and overseas subsidiaries, which are committed to converting to employee ownership on a case-by-case basis, being consistent with local laws, customs and other cultural and economic considerations. The Mondragon group’s credit union (Caja Laboral) is now practically Spain’s ninth largest bank and continues to recover from an initial 75% reduction in its profitability, unlike the other Spanish banks which are still flat lining. 

Co-operative members as equal co-owners of their own workplaces, enjoy job security and individual capital holdings, with an equal sharing of profits on a proportionate basis and an equal ‘one-member one vote’ say in the way their enterprises are run. Pay within the cooperatives is strictly egalitarian, with the highest rates payable other than in exceptional circumstances being no more than six and a half times the lowest. 

We can learn a great deal from the example Mondragon and its methods when it comes generating and retaining sustainable jobs. There is no reason why the co-operative approach cannot be used to bring in a community upward slow burn approach to economic development, something that will not just provide local jobs but real community beneficial sustainable developments which can transform our communities and our country’s economic potential.

A BANK FOR WALES

The call from Plaid for a new business bank for Wales to help small and medium sized businesses grow to reach their potential is a welcome one. At present many of our small and medium sized enterprises are  being denied credit by banks and this is stifling potential economic growth and the expansion of the private sector in Wales. Plaid’s economic commission is to investigate proposals for a Bank of Wales, to potentially run in the same way that the Sparkasse and Landesbanken (in Germany) which operate on a strictly regional basis to support local industries.

As noted elsewhere by the oggybloggyogwr; Germany has a unique network of state-owned, federal state-based (Länder) banks called Landesbanken. They offer a mix of commercial and private banking services and employ tens of thousands of people across Germany. They're primarily a source of credit and bonds for both public sector and private companies within their respective states. So the "big bank money" tends to be cycled within the state. That's probably one reason why economic disparities between regions aren't as pronounced within parts of the former West Germany as they are in a unitary state like the UK or France. 

Now to be brutally honest none of this is not a particularly new or radical idea, but, it may be a timely one, historically we once had a network of local banks focused on the drovers who moved livestock to sell in the larger export market. These were killed off as through the last quarter of the nineteenth and most of the twentieth century’s financial services were increasingly amalgamated, centralised and  standardised in London. The process did little for local entrepreneurs, business people and (certainly latterly) has done little for ordinary bank customers as banks have been increasingly run to serve their own needs rather than those of the people.

Alun Ffred Jones AM, Plaid Shadow Economy minister said:

“Plaid Cymru is ambitious for Wales – we want to see more business and economic growth throughout the country, creating jobs and improving skills.

“However, what I hear from businesses up and down Wales, and supported by surveys from the FSB and other business representatives, is that small businesses are still finding it difficult to get funding to help with their cashflow and to develop their future growth plans.

“It isn’t a problem which is unique to Wales, and the problem is commonly recognised, but the various credit proposals from Westminster haven’t provided the solution.

“In fact, all too often, we hear stories from business owners that have had to use their credit card to finance their growth plans because distant banks are cutting back on capital and unwilling to commit to plans to improve Wales.

“Private sector growth is vital to our economic recovery.

“Wales therefore needs to have a bank which operates on similar lines to the German Sparkasse and Landesbanken that operate on a geographical basis, developing special expertise in the local industries so that they are better equipped to make investment decisions.

“The Bank of Wales name was bought up by the Bank of Scotland and merged out of existence. It would be good if we could have that name back to use to benefit Wales, rather than it being left in a drawer, and being no good to anybody.

“Plaid Cymru’s economic commission will be investigating how we can make the banking system work better for Welsh business.”

During it’s relatively short life, what was known in some circles (to the intense irritation of Labour in Wales representatives) as the Plaid driven One Wales Government made significant efforts to act differently when it came to economic development and support for small to medium sized enterprises (SMEs). SMEs can and should play a significant role at the heart of our communities; they create wealth and sustainable medium to long term employment opportunities for local people.

Sadly since May 2011 the Labour in Wales minority government appears to have resurrected the old brain dead Welsh office model of economic development. Attracting branch factory operations of a relative short term duration does not help develop our economy. More than ever we really do need to think differently and focus economic development priorities on smaller local businesses who will be rooted in our communities and offer more flexible employment opportunities.

As has been noted elsewhere profits and investments made by home grown locally rooted businesses tend to stay within the communities where they are based. So Plaid’s concept of new Bank of Wales business bank to help small and medium sized businesses should be warmly welcomed, as this is one realistic way of putting wealth into our communities, not to mention developing and sustaining longer term employment possibilities.

LESSONS IN ICELANDIC

There are plenty of lessons to be learned from the way that Iceland has dealt with the consequences of the worldwide financial collapse. Iceland has worked to reduce (or cut) its dependence on the banking and finance sector of its economy, recognising that this sector is essentially unproductive, essentially short term in outlook and draws talented people away from more productive parts of the economy.

Iceland faced with the collapse of its major banks (in 2008) something that threatened to drag the state’s public finances down. The Icelandic Krona fell 50% against all major currencies, as unemployment roared up to 10% (not forgetting that this in a country where it had previously been negligible) and money flew out of the country at a truly scary rate.

The financial storm was weathered with capital controls (something the European Union Single Market prohibits) to stop the disappearance of cash. Around 100 new taxes were brought in and public spending slashed to the bone. Iceland borrowed money from its Scandinavian neighbours and the International Monetary Fund.

The one big difference was that Iceland let its privately owned banks, which were directly responsible for the crisis in the first place, die. Despite years of bullish talk from the City of London at the first sign of real trouble most (but not all) of the big boys went whining to Westminster for a bailout (which they got). In my opinion we would have been better off if Westminster had said no, you want to life by the market then you can die by it too! In Iceland’s case this meant that investors lost everything it crucially meant that taxpayers were not burdened with their banking debt.

Oddly enough in the darkest depths of the economic crash, following the collapse of the financial sector Icelandic businesses found that they had few problems when it came to recruiting highly skilled graduates. Iceland's businesses had previously struggled to recruit skilled graduates as they were being attracted to the bonus-paying banks, with the demise or reduction of that essentially unproductive sector they found the scientists, IT graduates and engineers that they required.

Any nation’s primary resource should be its people, this is something that Iceland, but not every state has recognised. Iceland is also blessed by a handy supply of cheap clean energy – something that reduces the country’s dependence on imported oil and gas. Around 99% of the Iceland’s energy needs are supplied from hydroelectric sources or hot thermal springs.

There are even proposals to export this renewable power via cables under the sea to Denmark or even Britain. This abundant cheap energy has brought financially important industries (and jobs) such as aluminium smelting, which uses significant quantities of electricity to convert bauxite (shipped in from Australia) into aluminium products in the country.

The Icelandic people have still paid a hard price for the financial collapse with renewed emigration and austerity, but, the country has just gone through the seventh straight quarter of economic growth (averaging at 2.5%) this is something most European governments would give their hind teeth for. Additionally Icelandic unemployment has dropped to slightly just under 5% something that suggests that a degree of economic confidence has returned – can we say the same here?

One significant difference between Iceland and the rest of the world is the fact that some of the bankers and the politicians responsible for the economic disaster ended up being charged for it (and in some case duly convicted). In the immediate aftermath of the crash, as the country's unemployment rate and inflation in Iceland sky-rocketed all hell broke loose on the political front. There was a huge wave of angry public protests and the then Prime Minister Geir Haarde’s government fell in 2009 and the former PM was duly charged with negligence and got his day in court.

Icelandic democracy remained vibrant despite the economic crash, in the March 2010, Icelandic voters rejected overwhelmingly via a referendum the proposal to pay the UK and the Netherlands 4 billion euros (£3.4 billion) they lost when the Icesave bank collapsed. In December 2010, Iceland the UK and the Netherlands agreed a new repayment deal. The country's parliament (in February 2011) voted yes to a new plan to repay the UK and the Netherlands for reimbursing 400,000 citizens who lost their savings in the collapse of Icesave's parent bank, Landsbanki.

Iceland's president, Olafur Grimsson, duly put the deal to a public vote. Back in April 2011, the voters of Iceland once again rejected the repayment deal in a referendum.  The Icelandic citizen’s view was that they should not be made to pay so much for their banks' bad decisions. Now this is a feeling that I suspect is shared by most of us, save for our elite who are busy making the rest of us pay off their mistakes and the mistakes of their friends in the City.

What are the real lessons from Iceland for Wales or anywhere else for that matter? Don’t let your economy get driven by a voracious and grossly irresponsible financial sector might be the first. Invest in the skills of your workers might be another lesson. Don’t be dependent upon imported energy suppliers and develop and retain control of your own sustainable renewable energy resources, we may not have hydrothermal power resources but we do have significant potential for developing renewable energy (onshore and off shore) which could provide us with a good reliable base for a sustainable economic future.

TIME TO THINK DIFFERENT THOUGHTS

Wales is littered with the remnants of failed models of economic development, most of them have failed to deliver any long term economic benefits and more than a few long term jobs to our people and our communities. We desperately need some fresh economic thinking, we need to think differently and to find economic models that can deliver sustainable long term jobs that can deliver real and lasting material benefits to our communities and our country.

The Mondragon co-operative which is a collective of around 250 companies and organisations based in the Basque Country may be one of those economic success stories in recession-hit Spain. Mondragon, which may be the world's largest worker co-operative, is helping the Basque economy try to resist the worst ravages of the recession in Spain. Mondragon which was established in 1956, in the province of Gipuzkoa; employs around 83,569 people with a business philosophy built around co-operation, participation, social responsibility and innovation.

Jobs with Mondragon

The Cooperative competes on international markets using democratic methods within its business organisation, helps to create jobs, and is committed to the human and professional development of its workers and pledges to development with its social environment. The unemployment rate in the Basque Country is 15%, and lower in the province of Gipuzkoa, (where Mondragon is based), the unemployment rate in Spain as a whole is now 25%. We in Wales could learn a great deals from the example Mondragon and its methods when it comes generating and retaining sustainable jobs.